If a Bhc franchisee obtains a loan, will Bhc act as a guarantor?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) Franchisee does not have a right to pledge, encumber, hypothecate or otherwise give any third party a security interest in this Agreement in any manner whatsoever (except that with Franchisor's consent, which will not be unreasonably withheld, Franchisee may pledge a security interest in this Agreement in connection with a Small Business Administration loan), nor sub franchise or otherwise transfer, or attempt to sub franchise or otherwise transfer the Franchised Business, or to transfer or sub franchise a portion but not all of Franchisee's rights hereunder without Franchisor's express prior written consent, which may be withheld for any reason in Franchisor's sole discretion.
Source: Item 10 — Financing (FDD page 29)
What This Means (2025 FDD)
Based on the 2025 FDD, Bhc's stance on acting as a guarantor for franchisee loans is not explicitly detailed. However, the FDD does state that a franchisee does not have a right to pledge, encumber, hypothecate or otherwise give any third party a security interest in the Franchise Agreement in any manner whatsoever, except that with Bhc's consent, which will not be unreasonably withheld, a franchisee may pledge a security interest in the Agreement in connection with a Small Business Administration loan.
This suggests that while Bhc doesn't automatically act as a guarantor, franchisees might be able to use the franchise agreement as collateral for an SBA loan with Bhc's consent. This consent is not guaranteed, but the FDD indicates it will not be unreasonably withheld.
Because the FDD does not provide explicit details on whether Bhc will act as a guarantor, prospective franchisees should directly ask Bhc about their policies and requirements regarding loan guarantees and what specific conditions would need to be met for Bhc to consider such an arrangement. This information is crucial for financial planning and securing necessary funding.